Classification systems for strategic drivers

To assist decision making, classifying the strategic drivers enables better analysis of their links to competitive advantage (Contractor & Lorange 1988; Koza & Lewin 1999; Nooteboom 2004; Todeva & Knoke 2005). With varied disciplinary perspectives interested in collaborative ventures there are no universally agreed upon classification system to better understand these drivers, nor agreement on the terminology itself. For example Lambert, Emmelhainz and Gardner (1996, p. 26) regard drivers as ‘compelling reason(s)’ to partner that create ‘strategic benefits’; Schmoltzi and Wallenburg (2011, p. 553) discuss ‘motives that drive’ the formation of horizontal cooperations. Gallié (2010) has determinants, whereas Spekman et al. (1998) talk of rationales and Contractor and Lorange (1988) discuss strategic gains. To simplify discussions in this thesis, strategic driver is used to encompass these diverse terms, following the definition of Lambert et al.’s (1996).

For an organisation, strategic drivers to form collaborative ventures vary according to multiple factors in the business ecosystem and with organisation-specific characteristics (Todeva & Knoke 2005). Creating a classification scheme to

Table 3.1 Examples of classification schemes of key drivers

Authors Examples of key drivers discussed

Contractor and Lorange (1988)

- Risk reduction - Economies of scale - Vertical quazi-integration

Kogut (1988) - Opportunities for organisational learning - Lowest cost transaction cost

- Improving strategic position

Nooteboom (2004) - Efficiency (exploitation) - Competence (exploration)

- Positional advantage (exploit + explore)

Todeva and Knoke (2005)

- Market seeking - Economies of scale

- Risk reduction and risk diversification - Overcoming legal/regulatory barriers Child, Faulkner and

Tallman (2005)

- Learning

- Skill substitution

Thomson and Perry (2006)

- Resource scarcity

- Resource and risk sharing - Symmetrically wanted resources - History of collaboration

- Complex issues

- High levels of interdependence

Hodge and Greve (2007)

- Environment

- Internal characteristics - Characteristics of CEO

accommodate this diversity is thus in itself complex. Further complexity is added with diverse literature interested in the entity as the basis for theoretical explorations. Consequently there is little congruence in classification schemes of the strategic drivers to collaborate. What is noticeable is the different emphasis placed on the potential for knowledge creation and transfer from collaborative ventures. With the importance of knowledge to sustainable competitive advantage and innovation this is unanticipated. To assist discussion, Table 3.1 is developed to provide a summary of some key authors and elements of their classification schemes for drivers to form collaborative ventures to demonstrate the variety.

Contractor and Lorange (1988) in their seminal publication in international business, focus on the strategic gains arising from the increasing use of negotiated joint arrangements. They classify the strategic contributions of such joint arrangements into seven areas for potential benefit, including risk reduction, economies of scale and vertical quasi integration. For the latter, Contractor and Lorange (1988) also acknowledge that there are other benefits, such as cost savings and incorporation of technological advances (Williamson 1975). Thomson and Perry (2006) suggest key antecedents, based in a literature review, include resource scarcity (Levine & White 1961), the need for resource and risk sharing (Alter & Hage 1993), each partner having resources the other partner needs (Gray 1989; Gray & Wood 1991; Pfeffer & Salancik 1978), previous history of collaboration (Radin 1996), complex issues (O'Toole 1997) and high levels of interdependence (Logsdon 1991). Neither of these classification schemes includes mention of knowledge creation, transfer or learning as a strategic driver.

In contrast, Kogut (1988) investigating motivating factors behind joint venture formations identifies that the creation of opportunities for organisational learning is one of three strong motivators, in addition to the motivation of being a lowest transaction cost alternative and enabling a better strategic position to be achieved. Child, Faulkner and Tallman (2005, p. 77) comment that these three motivating factors ‘are in fact concerned with the overarching motive of enabling the partners to become more competitive in relation to their rivals in their chosen markets’ stressing the link to the business environment. Similarly Spekman et al. (1998) in their review of alliance literature discuss both offensive reasons, such as competitive actions, accessing markets and setting industry standards, and defensive reasons focusing on protection, risk sharing and economies of scale (Bronder & Pritzl 1992; Ohmae 1989). Alliances’ role in the facilitation of learning, for instance to access technology, and as a precursor to a merger or acquisition, are however discussed (Hamel 1991; Spekman et al. 1998).

Nooteboom (2004) provides another conceptual contribution from an inter- disciplinary approach, with a strong link to competitive advantage. He classifies the drivers into three distinct groups, namely efficiency, competence and positional advantage, justifying the chosen classification by whether the driver is for exploitation, exploration or both. Nooteboom (2004, p.37) suggests that efficiencies are exploitative, intended to maximise ‘the usage of existing assets and competences’. His second classification refers to the exploration for new competences, for example through learning and innovation. Positional advantage is viewed as a combination of exploitation and exploration.

Arguing from an economic perspective Child, Faulkner and Tallman (2005, p. 79) suggest that there are two distinct rationales behind the formation of a collaborative venture, learning and skill substitution, but continue that in ‘the complexity of an actual cooperative arrangement they may well get muddled, and substitution turn into learning, but both coexist conceptually as distinct rationales and they carry with them different risks’. Child, Faulkner and Tallman (2005) consider the drivers in terms of an organisation’s external challenges and internal needs. They argue strongly that change in the external trading environment is one of two key motivations for forming a collaborative venture. Besides changes in the external trading environment, Child, Faulkner and Tallman (2005) suggest that the other key motivation to collaborate is a feeling of inadequacy or deficiency in terms of resources and/or skills. Internal needs such as achieving economies of scale or reducing R&D risks (Pfeffer & Nowak 1976; Porter & Fuller 1986) and achieving value-chain synergies can all be met by collaborating. Such perceived resource deficiencies can drive organisations to seek collaborative ventures.

Todeva and Knoke (2005), basing their analysis in international business and strategic management, suggest that organisations approach collaboration in the context of their internal issues, whilst considering economic benefits, strategic positioning and political manoeuvring. By drawing on a range of theoretical literature, they create a list of eighteen strategic motives that drive the formation of alliances, including market seeking, acquiring means of distribution and complementarity of goods and services to markets. Todeva and Knoke’s (2005, p. 129) drivers are not collated into similar groups. Knowledge transfer is included as a driver. Todeva and Knoke (2005, p. 137) suggest that learning from their

collaborators is often either a ‘primary goal or a derivative of other objectives, such as creating new products and technologies or penetrating new markets’.

Powell, Koput and Smith-Doerr argue (1996, p.117) there are ‘two rather different strands of thinking about collaboration and learning’. The first strand views the decision to pool resources in a collaboration as strategic and it ‘depends on calculations involving risk versus return’ (Powell, Koput & Smith-Doerr 1996, p.117). The decision can then be analysed from a transaction cost perspective; the form of the collaboration depends on power positions of each firm and the particular skills and resources that are going to be exchanged (Hennart 1988; Parkhe 1993; Pisano 1989).

In contrast the second strand, based on learning as a social construction process, gives the context of the collaborative relationship more significance (Brown & Duguid 1991; Powell, Koput & Smith-Doerr 1996). From this view, learning occurs as a function of the context in which knowledge is created; a ‘fluid and evolving’ community generates more knowledge than the traditional, formal structure of some organisations for example (Powell, Koput & Smith-Doerr 1996, p.118). Being as collaborative ventures are dynamic entities that operate in an evolving environment, new knowledge will arise; the sources of new knowledge are not exclusively found in any one organisation (Powell, Koput & Smith-Doerr 1996; Senge 1990).

The foregoing discussion demonstrates that there is wide diversity in the strategic drivers to collaborate. Past experience of relationships, market position, joint resource capabilities and informational asymmetries can influence the level of

collaboration more than internal costs and benefits (Dietrich 2012). Todeva and Knoke (2005) observe that forming collaborative ventures is more driven by strategic intentions, rather than ‘retrospective economic rationalities’ (Todeva & Knoke 2005, p. 128). They argue that the decision is formed to achieve a joint purpose which is emerging from the organisations’ current situations, based on expectations of future benefits. Decisions to collaborate are neither responsive, nor determined rationally based on a specific purpose or compelling pressures in the business ecosystem. Such factors enable organisations to ‘construct post-facto justifications and rationalizations’ (Todeva & Knoke 2005, p. 129). The decision to form a collaborative venture is driven more by strategic intent to achieve future goals that improve the circumstances of all organisations involved, and for the created entity.